usctrojancpa
Well-known member
Panda said:
The labor market in Orange County is still tight.
Observations from the front lines of the Irvine housing market?
- Thread starter usctrojancpa
- Start date
The labor market in Orange County is still tight.
usctrojancpa
Well-known member
Compressed-Village said:
As well as how much equity the owners have. If they have over 10% equity, then doing a traditional sale is the way to go. One of my clients told me a theory that he thinks that sellers may be holding off on putting their homes up for sale on the market as they want a place to hunker down and let the virus blow over. I thought that was an interesting theory.
usctrojancpa
Well-known member
I compiled the March data but because it was so cloudy due to the lock down mid-month I've decided to wait to provide my data and analysis, along with specifics that I've seen and heard about, once the April data comes in next week. It's very interesting to see what is actually happening in the market.
paydawg
Active member
Does anybody have any insight into the rental rates the past month? Have they gone down? My out-of-state investment property is up for a lease renewal and my property manager is recommending I RAISE my tenant's rate by ~10%. I'm feeling a bit queezy about raising rates in this environment, but if that's what the rental comps are saying...
usctrojancpa
Well-known member
paydawg said:
Depends on the amount of rental properties on the market. Here in Irvine, I rented 3 rental listings within 2-4 weeks at comps to $100 off comps (rental prices ranged from $3,000 to $3,800). I would recommend that you run rental comps and see how many other comparable rental units are listed for rent in your area.
Dr. CA Real Estate
New member
paydawg said:
Is your property manager a descendant of Hermann von Siemens ??
Irvinehomeseeker
Active member
USCTrojanCPA said:
A bit to tough to find qualified tenants as ppl are not moving much. I have got some interest after I reduced rental by 200$...
usctrojancpa
Well-known member
Attached is the data for both March and April 2020, I also included data for the number of homes that closed for $1m and less and what % of the total sales that represented from Jan 2018 through April 2020. I really wanted to wait until I got and analyzed the April 2020 data as the March data was all over the board with the stay-at-home order happening in the middle of March.
Sales in March 2020 were 232 or 18% higher than March 2019 but keep in mind that most all of those escrows were opened in Jan/Feb. The March 2020 median price per SF increased to $484/sf or about 4% from March 2019 to March 2020 but I'd venture to say that it was an outlier month with a greater mix of homes above $1m closing in the month (38% vs. 34% using the 12-month trailing average) and without this blip we would have probably seen the March 2020 median price per SF closer to being flat with March 2019. The real action happened on the inventory side in March. Around the middle of the month we had over 700 listed homes on the market with about 250 homes in escrow as we were entering the Spring selling season. Then the stay-at-home order happened the number of active listings decreased by about 150 homes by the end of the home to 589 (28% lower than at the end of March 2019) which was slightly up from the end of Feb as many sellers pulled their listing off the market (some converted them to rentals). At the same time, I saw the number of homes in escrows fall to around 150 by early April as there were many escrow cancellations (happened to me with my 56 Snowdrop Tree listing as the buyer got furloughed after the stay-at-home order).
Sales in April 2020 were 128 or 46% lower than April 2019 and these figures definitely reflect COVID issues as buyers started pulling back and cancelling escrows. The April 2020 median price per SF was basically flat with April 2020 at $476/sf and more inline with the trend that we've been seeing for the past 6 months. The number of homes in escrow hit a low of around 140 home in the middle of April and as of today (May 12th) that number has increased to 172 homes so activity has definitely picked up and coincides with what I've experienced with a few buyers (more details below). Inventory homes on the market for sale at the end of April 2020 increased to 638 from March 2020 by 8% but decreased by 287 homes or 31% from the end of April 2020 and as of today (May 12th) the number of homes for sale is 609 which explains why there is an increase of homes in escrow. Of the 609 of homes on the market, 315 of them are priced at or under $1m (52% of all inventory) while April 2020 of homes at or under $1m were 84 or 66% which is slightly higher than the March 2019 to Oct 2019 average of 65% (Nov 2019 to Feb 2020 average was 68%).
So what does all this mean? Well, it's a tale of 2 markets with the sub $1m market holding up fairly well with good buyer demand and a lack of inventory with 3.75 months of inventory (based upon April data) while the $1m+ market continues to bleed lower with a lot of supply and lower buyer demand (6.68 months of inventory). I've had experiences that support that data. Only one of my buyers who is looking for a home over $1m came off the sidelines in the past month to re-start their home search while I've had 2 previous buyers and 3 new buyers in the $600k to $900k price range who have contacted to start actively looking to buy. With 3 of those buyers, I've been outbid on purchase offers in the past few weeks and the other 2 buyers are waiting for a particular floor plan/lot on the new home side. I'm making semi-low ball offers for my $1m+ buyer but there are MANY stubborn sellers, especially foreign cash purchased homes that are sitting vacant (these sellers are in dream land thinking they can get above pre-COVID prices so we just let them sit and move on quickly). Home builders of sub $1m homes seem to be doing fairly well with sales, including Montara and Celeste, as they are selling most all of their currently released lots (probably due to the lack of resale inventory on the market). I went to register a buyer at Rise with Lennar at the end of April and she claimed that they put 18 homes into contract in the past week at their Great Park neighborhoods (most likely their sub $1m homes is my guess). On the listing side, I listed 2 homes (120 Holly Springs in Irvine and 28472 Porsena Way in Lake Forest) after the stay-at-home and sold both with multiple offers above the list price. So I'm seeing good demand and low supply on the lower end of the market, along with low interest rates, which seems to be keeping prices from declining while the inventory in the higher end continues to pile up with stubborn resale sellers and "quick move-in" unsold new homes. Premium higher end homes (larger lot, view lots, and/or highly upgraded) continue to sell at strong prices as well. My sellers who were looking to list in March-May delayed their listings until further notice based upon my discussions with them. See the interesting WSJ articles of how prices are prices during the pandemic:
https://www.wsj.com/articles/why-home-prices-are-rising-during-the-pandemic-11588671002
We also have seen some action interesting action in the mortgage market in the past 2 months as well. When the stock and bond market stopped functioning poorly we actually saw the 30-year fixed rate blip up as high as 3.75% in the middle of March from about 3.25% in late Feb/early March. Then the Fed stepped and started buying mortgage bonds which brought rates back down to 3.25% by the end of April but this created problems for lenders who hedged their locked rate and created many margin calls for lenders. There was also news that many non-direct lender jumbo loans began to dry up and several lenders started tightening up their lending standards (higher down payment %, higher FICO, etc). As of mid-May, I'm hearing/seeing 30-year jumbo purchase rates at 3% with 0pts and with the Fed continuing to buy mortgage bonds we may very well get into the high 2% range soon.
So where do we go from here? That is a tough question to answer but one that I get asked by both my buyers and sellers. That answer will be dependent on several variables including...1) inventory levels, 2) timing of good vaccines/treatments, 3) how effective the re-opening will be, 4) will the gov't keep providing stimulus to main street and small businesses, 5) where rates will be, and 6) how many of the lost/furloughed jobs come up. I think with the absolute best case scenario home prices will be flattish but my base case is that we'll probably see price small declines of anywhere between 2-5% in the next 9-12 months as I think rates continue to go lower which will cap price declines, especially in the sub $1m market.
Sales in March 2020 were 232 or 18% higher than March 2019 but keep in mind that most all of those escrows were opened in Jan/Feb. The March 2020 median price per SF increased to $484/sf or about 4% from March 2019 to March 2020 but I'd venture to say that it was an outlier month with a greater mix of homes above $1m closing in the month (38% vs. 34% using the 12-month trailing average) and without this blip we would have probably seen the March 2020 median price per SF closer to being flat with March 2019. The real action happened on the inventory side in March. Around the middle of the month we had over 700 listed homes on the market with about 250 homes in escrow as we were entering the Spring selling season. Then the stay-at-home order happened the number of active listings decreased by about 150 homes by the end of the home to 589 (28% lower than at the end of March 2019) which was slightly up from the end of Feb as many sellers pulled their listing off the market (some converted them to rentals). At the same time, I saw the number of homes in escrows fall to around 150 by early April as there were many escrow cancellations (happened to me with my 56 Snowdrop Tree listing as the buyer got furloughed after the stay-at-home order).
Sales in April 2020 were 128 or 46% lower than April 2019 and these figures definitely reflect COVID issues as buyers started pulling back and cancelling escrows. The April 2020 median price per SF was basically flat with April 2020 at $476/sf and more inline with the trend that we've been seeing for the past 6 months. The number of homes in escrow hit a low of around 140 home in the middle of April and as of today (May 12th) that number has increased to 172 homes so activity has definitely picked up and coincides with what I've experienced with a few buyers (more details below). Inventory homes on the market for sale at the end of April 2020 increased to 638 from March 2020 by 8% but decreased by 287 homes or 31% from the end of April 2020 and as of today (May 12th) the number of homes for sale is 609 which explains why there is an increase of homes in escrow. Of the 609 of homes on the market, 315 of them are priced at or under $1m (52% of all inventory) while April 2020 of homes at or under $1m were 84 or 66% which is slightly higher than the March 2019 to Oct 2019 average of 65% (Nov 2019 to Feb 2020 average was 68%).
So what does all this mean? Well, it's a tale of 2 markets with the sub $1m market holding up fairly well with good buyer demand and a lack of inventory with 3.75 months of inventory (based upon April data) while the $1m+ market continues to bleed lower with a lot of supply and lower buyer demand (6.68 months of inventory). I've had experiences that support that data. Only one of my buyers who is looking for a home over $1m came off the sidelines in the past month to re-start their home search while I've had 2 previous buyers and 3 new buyers in the $600k to $900k price range who have contacted to start actively looking to buy. With 3 of those buyers, I've been outbid on purchase offers in the past few weeks and the other 2 buyers are waiting for a particular floor plan/lot on the new home side. I'm making semi-low ball offers for my $1m+ buyer but there are MANY stubborn sellers, especially foreign cash purchased homes that are sitting vacant (these sellers are in dream land thinking they can get above pre-COVID prices so we just let them sit and move on quickly). Home builders of sub $1m homes seem to be doing fairly well with sales, including Montara and Celeste, as they are selling most all of their currently released lots (probably due to the lack of resale inventory on the market). I went to register a buyer at Rise with Lennar at the end of April and she claimed that they put 18 homes into contract in the past week at their Great Park neighborhoods (most likely their sub $1m homes is my guess). On the listing side, I listed 2 homes (120 Holly Springs in Irvine and 28472 Porsena Way in Lake Forest) after the stay-at-home and sold both with multiple offers above the list price. So I'm seeing good demand and low supply on the lower end of the market, along with low interest rates, which seems to be keeping prices from declining while the inventory in the higher end continues to pile up with stubborn resale sellers and "quick move-in" unsold new homes. Premium higher end homes (larger lot, view lots, and/or highly upgraded) continue to sell at strong prices as well. My sellers who were looking to list in March-May delayed their listings until further notice based upon my discussions with them. See the interesting WSJ articles of how prices are prices during the pandemic:
https://www.wsj.com/articles/why-home-prices-are-rising-during-the-pandemic-11588671002
We also have seen some action interesting action in the mortgage market in the past 2 months as well. When the stock and bond market stopped functioning poorly we actually saw the 30-year fixed rate blip up as high as 3.75% in the middle of March from about 3.25% in late Feb/early March. Then the Fed stepped and started buying mortgage bonds which brought rates back down to 3.25% by the end of April but this created problems for lenders who hedged their locked rate and created many margin calls for lenders. There was also news that many non-direct lender jumbo loans began to dry up and several lenders started tightening up their lending standards (higher down payment %, higher FICO, etc). As of mid-May, I'm hearing/seeing 30-year jumbo purchase rates at 3% with 0pts and with the Fed continuing to buy mortgage bonds we may very well get into the high 2% range soon.
So where do we go from here? That is a tough question to answer but one that I get asked by both my buyers and sellers. That answer will be dependent on several variables including...1) inventory levels, 2) timing of good vaccines/treatments, 3) how effective the re-opening will be, 4) will the gov't keep providing stimulus to main street and small businesses, 5) where rates will be, and 6) how many of the lost/furloughed jobs come up. I think with the absolute best case scenario home prices will be flattish but my base case is that we'll probably see price small declines of anywhere between 2-5% in the next 9-12 months as I think rates continue to go lower which will cap price declines, especially in the sub $1m market.
usctrojancpa
Well-known member
usctrojancpa
Well-known member
akkord said:
As the saying goes, good tenants are worth their weight in gold and not worth trying to extract some nominal rent increase from them.
Liar Loan
Well-known member
USCTrojanCPA said:
I'm curious about this statement. Since you've had a couple of recent listings with multiple offers above asking, and are expecting a base line scenario of 2-5% price declines in the next 9-12 months, what do you think made them delay their listings?
usctrojancpa
Well-known member
Liar Loan said:
The 2 most recent listings that got multiple offers were different from the listings that I've delayed with my other sellers. Holly Springs was a job relocation sale and since I got multiple offers on the Copeland listing, I funneled over those back-up buyers to Holly Springs with private viewings for all 3 of them which resulted in multiple offers. Porsena Way was a former rental property where the tenant moved out at the end of Feb and the seller needed to sell before the end of June to capture the tax gain exemption since they moved out at the end of June 2017. So we painted, did some minor upgrades, staged, and cleaned the condo before listing slightly below closed comps to generate a quick sale considering what was going on with the virus which resulted in multiple offers going over even the highest model match closed comp before the virus broke out. The sellers that have delayed their listings don't have an urgency to sell so I'll list their homes when we think it's the right time.
In terms of my prediction of the price drop, that's an average guestimate for the entire Irvine market as a whole. I think the lower end prices will probably be flattish while the higher end will most likely see price drops above 5%. Obviously if we start seeing big layoffs and more inventory begins to flood the market, home prices will fall further. If there are going to be any foreclosures or short sales (mostly people who bought very recently with minimal down payments), those will most likely happen in 2021 as the mortgage forbearance will give those folks some time.
usctrojancpa
Well-known member
Attached is the data for both May 2020. The data on its face looks horrible but remember that some of the data is rearview mirror data and one has to look at what is going on today to get the true sense of where the market is (more on that below).
Sales in May 2020 were 114 or over 59% lower than May 2019 but keep in mind that most all of those escrows were opened in March and April when the market hit the "pause" button on both the buy and sell side. On the surface it looks demand fell off a cliff and it sorta did with many buyers going on the sideline but the number properties in escrow have been increasing every week since early May and as of today (June 15th) there are 285 properties in escrow. What does that mean? That means that sales in June and July will have big increases compared to May.
The May 2020 median price per SF increased slightly to $479/sf from both May 2019 and April 2020. On the inventory front, we are seeing more listings begin to hit the market in early to the middle of May. Inventory levels increased to 752 homes on the market as of the end of May 2020 but that was still down 24% from the level of inventory at the end of May 2019. The lower end of the market continues to have a serious lack of inventory and this is resulting in many properties going into escrow fast with multiple offers, not just in Irvine from what I'm seeing.
What am I seeing in the market? I've had 6 buyers active their searches in the past month and a few of those buyers are looking at $1m+ homes so I'm seeing more middle market demand pick up. When I ask the buyers who prompted them to come off the sidelines I keep hearing two recurring themes....low interest rates and confidence in their employment. Sellers are also getting more comfortable listing their homes as the stay-at-home orders are getting lifted which resulted in 4 listings for me in the span of 6 weeks (2 already listed) and buyers are coming out. For example, I had 15 showings of my Firwood listing in 4 days (home went into escrow with multiple offers in less than a week). The builder sales offices have also told me that sales and activity have picked up considerably since early May, especially CalPac with its lower priced homes. I've been making several offers on resale homes for my buyers for my lower end buyers and they keep getting outbid with multiple offers and some of them that closed/will close over previous closed comps. I see that prices in the lower end of the market seem to be rising mainly due to the lack of resale inventory and good buyer demand (probably being driven by the all-time low interest rates near 3%).
Watch inventory levels, they will be your tell on where the market is going. The real estate market seems to be very resilient so we may not see any material price declines. Here are a few interesting articles that highlight this fact.
https://www.barrons.com/articles/the-pandemic-has-changed-what-home-buyers-want-51591987027?siteid=yhoof2&yptr=yahoo
https://finance.yahoo.com/news/bidding-wars-climb-may-coronavirus-160000327.html
https://finance.yahoo.com/news/homebuying-demand-25-higher-pandemic-220000017.html
Sales in May 2020 were 114 or over 59% lower than May 2019 but keep in mind that most all of those escrows were opened in March and April when the market hit the "pause" button on both the buy and sell side. On the surface it looks demand fell off a cliff and it sorta did with many buyers going on the sideline but the number properties in escrow have been increasing every week since early May and as of today (June 15th) there are 285 properties in escrow. What does that mean? That means that sales in June and July will have big increases compared to May.
The May 2020 median price per SF increased slightly to $479/sf from both May 2019 and April 2020. On the inventory front, we are seeing more listings begin to hit the market in early to the middle of May. Inventory levels increased to 752 homes on the market as of the end of May 2020 but that was still down 24% from the level of inventory at the end of May 2019. The lower end of the market continues to have a serious lack of inventory and this is resulting in many properties going into escrow fast with multiple offers, not just in Irvine from what I'm seeing.
What am I seeing in the market? I've had 6 buyers active their searches in the past month and a few of those buyers are looking at $1m+ homes so I'm seeing more middle market demand pick up. When I ask the buyers who prompted them to come off the sidelines I keep hearing two recurring themes....low interest rates and confidence in their employment. Sellers are also getting more comfortable listing their homes as the stay-at-home orders are getting lifted which resulted in 4 listings for me in the span of 6 weeks (2 already listed) and buyers are coming out. For example, I had 15 showings of my Firwood listing in 4 days (home went into escrow with multiple offers in less than a week). The builder sales offices have also told me that sales and activity have picked up considerably since early May, especially CalPac with its lower priced homes. I've been making several offers on resale homes for my buyers for my lower end buyers and they keep getting outbid with multiple offers and some of them that closed/will close over previous closed comps. I see that prices in the lower end of the market seem to be rising mainly due to the lack of resale inventory and good buyer demand (probably being driven by the all-time low interest rates near 3%).
Watch inventory levels, they will be your tell on where the market is going. The real estate market seems to be very resilient so we may not see any material price declines. Here are a few interesting articles that highlight this fact.
https://www.barrons.com/articles/the-pandemic-has-changed-what-home-buyers-want-51591987027?siteid=yhoof2&yptr=yahoo
https://finance.yahoo.com/news/bidding-wars-climb-may-coronavirus-160000327.html
https://finance.yahoo.com/news/homebuying-demand-25-higher-pandemic-220000017.html
usctrojancpa
Well-known member
irvineband
Member
What qualifies as middle of the market? also is the lower end of your middle range hotter than the upper range?
USCTrojanCPA said:
usctrojancpa
Well-known member
irvineband said:
For me, the middle market is $900k to about $1.25m. Yes, the lower end of the middle market is warmer than the higher end of the middle market but single family homes priced around $1.0m to $1.25m seem to be selling well too, especially in places like Woodbury, Stonegate, and Westpark.